Wednesday, May 29, 2013

Why subscriptions are bad for Adobe

I’ve written about Adobe’s move to subscriptions before, but I thought I’d take one last swing at it, and outline the primary reason why I think subscriptions are bad for customers and the industry.

There’s been a lot of defense of Adobe’s move to subscription pricing. The common threads of the defense seem to be:
  1. It’s a good dealwhich it is if you were buying the Master Collection and upgrading with every release, then it is a pretty good deal (at the current subscription rate.)
  2. If you can’t afford $50 a month, you’re a loser – certainly, if you’re a professional video producer and can’t afford $50 a month for the tools you use day-in and day-out, then you might want to reconsider your career choices. (But if your video passion is more of a hobby than a contact sport, $50 every month, can start to add up.)
  3. You’re already renting the software, so this isn’t really a changewell yes and no; all things being equal - and despite frequent OS changes and equipment updates - it’s not that unusual to be running software five to seven years after you purchased it. So yes, it is a change.
  4. If you think $50 is too much, you should see what X costs – Which may be true too, $50 a month is not a lot compared to other things…say a Rolls Royce. On the other hand, compared to a Big Mac, it is. 
But I want to re-iterate that I think subscriptions are a terrible model for Adobe, as well as for many of their customers. Not because Adobe won’t be able to do well financially - it’s likely that for the next few years they could do very well - what I worry about is what this will do to their long term development plans and goals.

Under the current model, Adobe develops a new release of their software every year or two (they tend to do major releases for some apps in the suite, and minor ones for others, as the mood strikes them.) Implicit in this upgrade cycle is that they have to do something that encourages people to upgrade to the new version; if CS7 is primarily a collection of bug fixes and a UI color change, then the current user base won’t rush out and buy the upgrade.

The subscription model changes that. Under a subscription model the user base becomes more stable and is pretty much locked in to the software - even more so than cable television. If I change cable providers, I can still watch most of the same TV shows, but if I stop subscribing to Creative Suite then I won’t be able to open my existing files.

Under the subscription model, the primary impetus changes to one of getting new customers hooked. There are two ways you can get them hooked; offering features no one else has, or offering the same features at a price no one else can match. The beauty of the subscription model is that you can afford a heavily discounted first year to get customers in, and then make it up once you have them hooked. And if that becomes your basic model, your drive to innovate to keep customers is lessened.

Monopolies are generally bad for consumers, but ultimately they are bad for innovation. Subscription pricing on software – particularly creative software – will create a tight binding between the user and the company. Companies with monopolies - or who have the customers closely tied to them - can spend so much time maintaining the status quo, they overlook changes in the market place. They become complacent. They also tend to price less competitively over time.

This is not only bad for the users and the industry, in the long term it’s bad for the company as well.

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